What Happens If You Break a Non-Disclosure Agreement (NDA)? Legal & Financial Consequences Explained
Understanding and Using Non-Disclosure Agreements (NDAs) For Your Business
Non-Disclosure Agreements (NDAs) are critical tools for Ohio businesses that want to protect confidential information including trade secrets, proprietary processes, customer lists, pricing strategies, legal settlements, and other sensitive data. When drafted and enforced correctly, an NDA can help prevent misuse of information and provide meaningful legal remedies if a breach occurs. Below is a practical overview of how to create and enforce an NDA under Ohio law.
What is an NDA?
NDAs, also referred to as Confidentiality Agreements, are contracts in which one or more parties agree not to disclose or misuse certain confidential information. In Ohio, NDAs are generally enforceable so long as they are reasonable in scope, supported by consideration, and not contrary to public policy. NDAs are commonly used with employees, independent contractors, vendors, investors, and business partners. They can be standalone agreements or included as part of a broader contract.
Key Elements of a Valid Ohio NDA
To ensure enforceability, an Ohio NDA should clearly include the following elements:
- Definition of Confidential Information
The agreement should precisely define what information is protected. Ohio law does not provide a statutory definition of "confidential information," unlike trade secrets, which are defined under ORC Ann. 1333.61. Ohio courts determining NDA enforceability are frequently critical of overly broad definitions (such as “all information related to the company”), favoring definitions that are specific and tied to legitimate business interests.
- Parties to the Agreement
The NDA should explicitly identify the parties bound by its terms. If affiliates, subsidiaries, or parent companies are intended to be included, they must be specifically referenced. Ohio courts have held that separate legal entities, such as parent corporations and subsidiaries, are not automatically liable for each other's actions unless explicitly included in the agreement. See Minno v. Pro-Fab, Inc., 905 N.E.2d 613 (Ohio 2009).
- Permitted Use and Disclosure
The NDA should state how the receiving party may use confidential information and identify any permitted disclosures (for example, to legal counsel or as required by law).
- Duration of the Obligation
Ohio courts evaluate whether the confidentiality period is reasonable. Some information—such as trade secrets—may be protected indefinitely, while other information may justify a fixed term.
- Exclusions
Standard NDAs exclude information that is publicly available, independently developed, or lawfully obtained from another source.
- Remedies for Breach
The agreement should specify available remedies. Ideally, NDAs should be drafted specifically to allow employers confronted with a breach to (a) prevent the further disclosure of confidential information through immediate injunctive relief, (b) seek compensation for the harm caused by such disclosure through monetary damages, and (c) recover attorneys’ fees.
- Consideration
Like all Ohio contracts, an NDA must be supported by consideration. For employees, initial employment is sufficient consideration; for existing employees, continued employment or another benefit is typically required for the NDA to be enforceable.
Best Practices for Ohio Businesses
To maximize enforceability:
- Tailor NDAs to the specific relationship and information involved;
- Limit confidentiality obligations to what is reasonably necessary;
- Consider limiting which agents parties can disclose confidential information to;
- Ensure consistent use and enforcement across employees and contractors; and
- Train employees on confidentiality obligations and document compliance efforts.
Have Questions About NDAs? Contact Strauss Troy
Non-disclosure agreements play a key role in safeguarding sensitive information and fostering trust between parties. Taking the time to properly document NDAs and to ensure they are enforceable can help prevent disputes and protect valuable business interests.
If you are looking to implement an NDA or are facing a dispute involving confidentiality obligations, experienced legal guidance is essential. Contact Strauss Troy Attorneys for trusted advice tailored to your situation. Reach out today to schedule a consultation and get the support you need to protect your rights and interests.
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